Bank Of India vs State & Ors.
2010 Latest Caselaw 4202 Del

                   * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                               Date of Reserve: 10th August, 2010
                                              Date of Order: 10th September, 2010
+ CRL.M.C. 2452/2009
%                                                           10.09.2010

BANK OF INDIA                                                        ..... Petitioner
           Through: Ms. Manjula Gandhi, Advocate

                             Versus

STATE & ORS.                                                      ..... Respondent
     Through:                Mr. O.P. Saxena, APP for State
                             Mr. P.K. Dham and Mr. Rahul Tandon, Advocates for R-
                             2 and 3



JUSTICE SHIV NARAYAN DHINGRA

1. Whether reporters of local papers may be allowed to see the judgment?           Yes

2. To be referred to the reporter or not?                                          Yes

3. Whether judgment should be reported in Digest?                                  Yes

JUDGMENT

1. This petition under Section 482 Cr. P.C. raises an important issue as

to who is the "Holder in Due Course" of a cheque.

2. The brief facts relevant for the purpose of deciding this petition are

that the petitioner bank filed a complaint against the respondent No. 2

Charanjeev Singh Ahluwalia, a director of respondent No. 3, and

respondent No. 3 M/s. Delta Airlaid Hygiene Pvt. Ltd. stating that the

accused/respondent No. 2 had taken credit facilities from the bank to the

tune of ` 1.10 crore and availed these limits and did not pay the dues.

The bank served a notice under Section 13(2) of the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interests

(SARFAESI) Act, 2002 upon the accused and called upon the accused to

discharge this liability by paying the due amount of the bank to the tune of

` 1,04,72,444/- along with interest @ 16 per cent per annum within 60

days. Accused Charanjeev Singh Ahluwalia issued two cheques in the

name of his company for the sum of ` 70.00 lac and ` 34.00 lac drawn on

State Bank of Bikaner & Jaipur, Karol Bagh branch and handed over the

cheques to the complainant bank in due course of business to clear the

outstanding dues towards the complainant bank assuring that the cheque

would be honoured. The cheques were dishonoured with remarks of the

bank "funds insufficient" and "exceeds arrangements" and the

complainant bank filed a complaint under Section 138 of Negotiable

Instrument Act against the respondent No. 2 Director of the company.

3. There is no dispute that the Director of the company Charanjeev

Singh Ahluwalia had issued these cheques from his personal account in

favour of the company so that the amount so deposited in the account of

the company that had availed overdraft and other facilities from the bank

is utilized for discharging dues of the bank. Otherwise, there was no

reason for the Director to issue these cheques in favour of the company.

There was no transaction between respondent No. 2, Director and

respondent No. 3, his company requiring issuance of these cheques. On

dishonour of the cheques, the bank filed complaint claiming itself to be the

„Holder in Due Course‟. While learned MM issued a notice under Section

251 Cr. P.C. on the accused persons, on revision, the learned ASJ observed

that the bank was not a „Holder in Due Course‟ since there was no

endorsement under Section 16 of N.I. Act made on the cheque and the

status of complainant bank, under these circumstances, cannot be treated

that of a „Holder in Due Course‟.

4. Section 9 of the N.I. Act defines „Holder in Due Course‟ as under:

""Holder in due course"- "Holder in due course"

means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or dndorsee thereof, if [payable to order], before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

5. It is apparent from this definition that for being a „holder in due

course‟ of a bill or a cheque it was not necessary that there should be an

endorsement on the bill or cheque. „Holder in due course‟ has been

defined as any person, who for consideration, becomes the possessor of

the promissory note or cheque. There is no doubt that endorsee or the

payee of such a bill or cheque are also considered as „holder in due

course‟, but, it is not the case that payee or endorsee alone are holders in

due course. A person whose banking account is overdrawn if negotiates

with his bankers a cheque, drawn by a third party, to reduce the overdraft,

the banker becomes a holder for value of the cheque. The pre-existing

debt of the overdraft is a sufficient consideration for the negotiation of a

cheque to the banker. If a person handovers cheque to the bank with the

clear understanding to the bank that cheque is towards the debt payable

by the company, though the cheque remains in the name of the company

but the bank becomes holder of the cheque in due course. What is to be

seen is that whether the bank has come into possession of the cheque for

a value pursuant to a contract between the parties express or implied.

The credit given by a bank to its customer can be discharged by any third

person and when the third person issues cheque in the name of the

customer assuring bank that this would wipe out the overdraft or the other

dues payable by the customer then the cheque in the hands of the bank is

for consideration and the bank is „holder in due course‟. It is not

necessary that the cheque should be endorsed in favour of the bank.

What is to be seen is if the bank becomes holder for value and comes in

possession of the instrument for consideration. The existing debt is

always considered as a valid consideration. In India Saree Museum vs. P.

Kapurchand, 1991 (1) BC 344, Karnataka High Court held that it is not only

the endorsee who becomes a holder in due course but also a person who

gets possession of the negotiable instruments for consideration, which

means, he need not be an endorsee to be a holder in due course. Once it

is established to the satisfaction of the Court that the cheques were issued

for discharge of the debt of the company, the bank who had given this

debt to the company would be considered as „holder in due course‟. The

„holder in due course‟ of cheque means any person entitled to receive or

recover the amount due thereon from the parties thereto.

6. The Trial Court relied upon a judgment delivered by Punjab &

Haryana High Court in Punjab National Bank Vs. Hingiri Traders 2004 (1)

DRC 260. With due respect to Punjab & Haryana High Court, I consider

that the view of Punjab & Haryana High Court was not correct. Punjab &

Haryana High Court had read Section 9 of the Negotiable Instrument Act

along with Section 15 and 16 thereof. Section 9 of N.I. Act is an

independent provision under Negotiable Instrument Act and it cannot be

confused with the provision regarding endorsee or endorsement. „Holder

in due course‟ has to be considered independent to the endorsee or

endorsement and where a cheque is issued by a Director to discharge the

debt of the company payable towards the bank, I consider that the bank is

„holder in due course‟, even if there is no endorsement made on the

cheque, because, the moment amount of the cheque had gone to the

account of the company, it was to go the bank towards the loan taken by

the company. In this case the cheques were solely issued for the

discharge of the debt.

7. I, therefore, consider that the decision of the Sessions Court was not

on sound footing. The order of the Sessions Court is hereby set aside.

Petitioner is held to be „holder in due course‟ of the cheques. The

complaint of the petitioner is held to be maintainable.

8. The parties shall appear before the concerned ACMM on 23rd

September, 2010 and the ACMM shall mark it to the concerned MM.

September 10, 2010                                   SHIV NARAYAN DHINGRA, J.
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